Eight-term Florida Republican congressman Mario Diaz-Balart has been accused of simultaneously claiming two primary residences, one in Florida and one in the District of Columbia. The double claim is alleged to have helped him access improved mortgage terms and pay lower property taxes.
Home is where the financial benefits are
Buyers get better interest rates for primary residences than they do for rentals or second homes. This is because lenders see a mortgage on a home that is lived in as lower risk. Declaring that a property is your primary residence is a great way to reduce borrowing costs, but the trick is you are only supposed to have main home at a time.
According to columnist and mortgage broker Grant Stern, Congressman Mario Diaz-Balart has claimed two primary residences in overlapping mortgage applications – a possible federal offence. In a detailed exposé published on the non-profit DC Report, Stern explains how in 2012 the Miami representative committed to making a condominium on D Street in DC his primary residence for twelve months to get better terms. Just nine months later he refinanced his Miami home, declaring it his primary residence for similar reasons.
“Mortgage fraud happens when a borrower provides knowingly incorrect or false information or documents in order to qualify for a loan he or she could otherwise not qualify to borrow,” Stern wrote.
In Stern’s opinion, Diaz-Balart may face more than just charges of breaking federal criminal law. The double-claim may also send a few angry bankers his way.
“‘Occupancy fraud’ is aggressively enforced by lenders and banking regulators,” Stern explained. “The risk of the loan not being paid back is much higher on properties that are not owner-occupied. This was a major factor in the 2008 mortgage crisis that sank the economy.”
The benefits accrued for claiming two main homes extend beyond just interest rates, however. Mortgage lenders are willing to lend more against a client’s actual home than other types of property. By claiming the DC condo as his primary residence, Diaz-Balart may have received a bigger mortgage than he would otherwise be eligible for.
Florida law also allows homeowners to claim significant tax relief on their primary residence. According to Stern, the taxable value of Diaz-Balart’s Florida home was reduced from $390,000 to just $180,000 because he declared it as his main residence.
Is Mario Diaz-Balart a Florida resident or not?
Stern’s discovery raises a very interesting question: was Mario Diaz-Balart legally a Florida resident on election day in 2012? At the time he was still legally committed to maintaining his main residence in the District of Columbia.
The residency requirement in the US Constitution is far from precise, saying that Congressmen must “be an Inhabitant of that State in which he shall be chosen.” Establishing when a candidate fails this vague standard has always been complicated.
Referring to a discussion of another congressman’s eligibility, Richard Winger of Ballot Access News wrote, “The matter has already been litigated, both in New York and in Texas. A congressional candidate does not lose eligibility by being a resident of another state before the election. The only residence requirement for congress in the U.S. Constitution is residency as of election day.”
The low bar set by the Constitution has made proving representatives ineligible a very difficult task. Diaz-Balart’s June 2012 declaration that he would maintain his DC home in as his primary residence for twelve months creates an unusually strong case to question his legitimacy as a congressman, however. Not only did he gain financially from the declaration, but he made it under penalty of federal law.
Whether the suspected fraud becomes an election issue remains to be seen. So far there has been no comment from Diaz-Balart. His election opponent, Democrat Mary Barzee Flores, has said nothing either. But she has retweeted the DC Report blog post.